Can Fresh Funds Jump-Start a U.S. Nuclear Renaissance?

President Obama announced the first federal nuclear-power loan guarantee, $8 billion for Southern Co. to build two new reactors in Georgia.

In a speech at a job-training center at the IBEW Local 26 headquarters in Lanham, Md., Obama said the loan guarantee will help "build a new generation of safe, clean nuclear power plants in America" as part of a White House effort to create a "clean energy" economy and reduce greenhouse gas emissions.

"In order to truly harness our potential in clean energy, we'll have to do more. ... We'll have to make tough decisions," Obama said at the facility, which trains workers in electrical engineering and other skills needed for clean-technology jobs, including positions at nuclear power plants.

Obama emphasized the need for the United States to remain competitive with China, France, Japan and other countries, which are building a total of 56 new nuclear reactors.

"Make no mistake: Whether it is nuclear energy, or solar or wind energy, if we fail to invest in these technologies today, we'll be importing them tomorrow," he said.

Obama noted that many people will disagree with his administration's decision to support nuclear power, but he said differences should not stop the country from moving ahead on energy issues, a theme in many recent speeches.

"On an issue which affects our economy, our security and the future of our planet, we cannot continue to be mired in the same old debates between left and right, between environmentalists and entrepreneurs," he said.

"The fact is, changing the ways we produce and use energy requires us to think anew and act anew. And it demands of us a willingness to extend our hand across old divides, to act in good faith, to move beyond the broken politics of the past," he said.

Obama reminded environmentalists who oppose the expansion of nuclear power that reactors are the largest sources of power that do not produce carbon emissions. He also reminded Republicans who oppose capping carbon emissions that curbing greenhouse gases would offer the greatest incentive for building new nuclear power plants. He called on the Senate to pass a bipartisan energy and climate bill.

Southern Co. says the construction of the two reactors at its Vogtle site near Burke, Ga., would create about 3,000 construction jobs and more than 800 permanent operations jobs.

The federal loan guarantee is conditioned on the project's receiving an operating and construction license for the two units from the Nuclear Regulatory Commission, which Southern estimates could come as early as next year.

The company has not provided a total cost for the new units, but estimates range from $7 billion to $9 billion per reactor. The loan guarantee would cover up to 70 percent of Southern's portion of the project's costs, a company spokesman said.

Southern Co. through its subsidiary Georgia Power Co. owns about 45 percent of the new units; Oglethorpe Power Corp. and Municipal Electric Authority of Georgia make up most of the other half.

The conditional award will take up almost half of the $18.5 billion apportioned for nuclear power in the Energy Department's loan guarantee program, which officials originally estimated could support up to four applications. Congress established the program in the 2005 energy bill to help support advanced clean-energy technology with low or no carbon emissions.

Fight over guarantees

The White House has proposed tripling loan guarantee authority to $54 billion in its fiscal 2011 budget in order to support seven to 10 new reactors. Under the program, the government guarantees up to 80 percent of the project's costs if the project fails but does not provide any upfront investment.

The nuclear industry says the loan guarantees are imperative to get financial investment in the first few reactors to be licensed and constructed in the United States in about 30 years. The loan guarantee authority does not cost taxpayers, as companies must pay an upfront fee to use the federal award, which will cover any projects if they fail, according to the industry.

"This loan guarantee, and others to follow, will act as a catalyst to accelerate construction of new nuclear plants and other low- and non-emitting sources of electricity," Marvin Fertel, president and CEO of the Nuclear Energy Institute, said in a statement.

"By easing access to capital markets for electric companies seeking to build new reactors and reducing the cost of capital for clean-energy projects, loan guarantees reduce the cost of electricity to consumers -- a significant win-win proposition in these difficult economic times," he said.

But fiscal watchdogs and environmental groups have balked at loan guarantees, calling them a "bailout" program for the nuclear industry, a burden on taxpayers and an inefficient use of limited resources to decrease greenhouse gas emissions.

"The inability to project true construction costs and timelines coupled with regulatory issues that plagued the nuclear industry in the past have not been resolved," said Tyson Slocum of Public Citizen in a statement. "Not only is the final price tag for Southern Company's two new reactors unknown, but the reactor design that has been tapped for federal backing, the Westinghouse AP1000, has yet to receive design certification from the NRC."

Said Carl Pope, executive director of the Sierra Club, "We need to prioritize the cleanest, cheapest, safest and fastest ways to reduce emissions, and nuclear power is neither clean, cheap, nor fast, nor safe. The loan guarantees announced today may ease the politics around comprehensive clean energy and climate legislation, but we do not believe that they are the best policy."